Thursday, January 16, 2014

Indonesian Chicken?

It is arguably one of the most far-reaching economic policy decisions the Indonesian government has taken since President Susilo Bambang Yudhoyono came to power some ten years ago. The new law, which came into effect on January 12, stipulates that only "processed" minerals may be shipped to other countries - although some exceptions were made. The government argues the long-planned ban on mineral ore exports is designed to strengthen the state-owned manufacturing industry.

....According to Sutan Bhatoegana, chairman of the Indonesian Parliament's House Committee for Mining Affairs, the Southeast Asian nation will "benefit greatly" from this law because "we will no longer sell raw materials for little money."

Brilliant idea, except for the foreign mining companies who have failed to cooperate by building processing facilities in Indonesia. Nor do the Indonesians themselves have the funds to do so. So far thousands have been laid off from their mining jobs, but the politicians are willing to wait;

Sutan Bhaetogana also admits that this "will have negative consequences in the short term," and result in a temporary drop in government revenues. But the member of parliament is nonetheless convinced that this will last only for three to four months and that the nation will recover.

However, small, local traders have a different view. Their livelihoods are threatened as they cannot afford to build and run their own processing plants. According to the Indonesian Mineral Entrepreneurs Association, some 30,000 mine workers have already lost their jobs, prompting people to take to the streets of Jakarta in protest. Indonesia will hold both parliamentary and presidential elections this year. Analysts expect the dispute surrounding the mining industry to become one of the top campaign issues.